Shell begins drilling in Alaska's Chukchi Sea

After a six-year wait and clearing countless hurdles, Royal Dutch Shell PLC's (RDSA.LN, RDSA) U.S. unit said it began drilling in Alaska's Chukchi Sea on Sunday.

This is the first time in more than two decades that the oil industry gets access to the U.S. offshore Arctic. If successful, Shell's foray could pave the way for the exploitation of one of the world's last oil frontiers.

Shell's bid to tap the Arctic's vaunted offshore oil and gas riches has met with resistance from environmentalists, strict scrutiny from cautious regulators and persistent sea ice. Now the Anglo-Dutch oil giant must cram as much drilling activity as it can in a short window that lasts through late September in the Chukchi Sea and late October in the Beaufort Sea, depending on weather forecasts.

One of the two drillships Shell has leased for the Alaska drilling campaign, the Noble Discoverer, early Sunday began digging the so-called "top hole" of a prospect dubbed "Burger"--which includes a 1,400-feet-deep pilot well and a 20-by-40-foot hole right beneath the seabed, which will house the blow-out preventer, a valve that is designed to kill any unexpected gushers. Burying the blow-out preventer in that fashion protects it from sea ice, Shell said.

The process could take about two weeks, after which it could either proceed to drill the entire well--to a depth of between 7,000 and 9,000 feet, or move the rig to another location and drill a similar top hole, said Peter Slaiby, Shell's vice president for Alaska operations. The process to drill a well down to its target depth, from initial work to completion, lasts about a month, he said. This year Shell plans to do work in up to five wells, three in the Chukchi Sea and two in the Beaufort Sea.

Right now, the company has permission from U.S. authorities to drill only the top part of the wells; a permit to drill in oil-bearing areas can be granted onl after an Arctic spill-containment system is in place, the U.S. Department of Interior has said. The containment system is being tested in Washington State and would require about two weeks to sail to the location, Shell said.

The U.S. government is closely watching the operation; regulators with the Bureau of Safety and Environmental Enforcement, which oversees offshore drilling, were present aboard the drillship that began working Sunday. "The public wants to be assured this is done right," Mr. Slaiby said.

Mr. Slaiby added that drilling these wells, which are located in shallow waters, does not represent major technical challenges, and that sea conditions are more benign here than in the North Sea, for example. The challenge comes from the remoteness of the operation, ice features and low temperatures, he said.

After a six-year wait and clearance of countless hurdles, Royal Dutch Shell PLC's (RDSA.LN, RDSA) U.S. unit said Sunday it had begun drilling in Alaska's Chukchi Sea.

This is the first time in more than two decades that the oil industry gets access to the U.S. offshore Arctic. If successful, Shell's foray could pave the way for the exploitation of one of the world's last oil frontiers.

Shell's bid to tap the Arctic's vaunted offshore oil and gas riches has met with resistance from environmentalists, strict scrutiny from cautious regulators and persistent sea ice. Now the Anglo-Dutch oil giant must cram as much drilling activity as it can in a short window that lasts through late September in the Chukchi Sea and late October in the Beaufort Sea, depending on weather forecasts.

One of the two drillships Shell has leased for the Alaska drilling campaign, the Noble Discoverer, early Sunday began digging the so-called top hole of a prospect dubbed Burger. It will include a 1,400-feet-deep pilot well and a 20-by-40-foot hole right beneath the seabed, which will house the blow-out preventer, a valve that is designed to kill any unexpected gushers. Burying the blow-out preventer in that fashion protects it from sea ice, Shell said.

The process could take about two weeks, after which it could either proceed to drill the entire well to a depth of between 7,000 and 9,000 feet, or move the rig to another location and drill a similar top hole, said Peter Slaiby, Shell's vice president for Alaska operations. The process to drill a well down to its target depth, from initial work to completion, lasts about a month, he said. This year Shell plans to do work in up to five wells, three in the Chukchi Sea and two in the Beaufort Sea.

Right now, the company has permission from U.S. authorities to drill only the top part of the wells; a permit to drill in oil-bearing areas can be granted onl after an Arctic spill-containment system is in place, the U.S. Department of Interior has said. The containment system is being tested in Washington State and would require about two weeks to sail to the location, Shell said.

The U.S. government is closely watching the operation; regulators with the Bureau of Safety and Environmental Enforcement, which oversees offshore drilling, were present aboard the drillship that began working Sunday. "The public wants to be assured this is done right," Mr. Slaiby said.

Mr. Slaiby added that drilling these wells, which are located in shallow waters, does not represent major technical challenges, and that sea conditions are more benign here than in the North Sea, for example. The challenge comes from the remoteness of the operation, ice features and low temperatures, he said.

Shell's efforts, however, continues to be strongly criticized by environmentalists. Dan Howells, Greenpeace's deputy campaigns director, said in a statement that "whatever Shell is able to do in the narrow window between now and when the sea ice returns, it won't erase the clear evidence we've seen in the past two months that there's no such thing as safe drilling in the Arctic."

Mr. Howells pointed to logistical failures in Shell's drilling plan. In July, the Noble Discoverer broke loose from its moorings while anchored off the Alaskan coast. "They've only proven one thing this summer, that oil companies are simply not equipped to deal with the unique challenges of operating in the Arctic," Mr. Howells said.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.